Super-Complaint Launched By Citizens Advice Over Loyalty Penalty

Citizens Advice has revealed customers who stay loyal to their providers are losing out on over £4 billion a year. The national charity has lodged a super-complaint with the Competition and Markets Authority (CMA), calling for the regulator to outline how the problem can be fixed. A super-complaint is a request for a regulator to investigate an issue. They then have to respond publicly within 90 days. This response either accepts the issue and states how they intend to address it, or rejects the issue and explains why they don’t consider it a problem.

The practice of overcharging loyal customers is widespread, and Citizens Advice has repeatedly warned that loyal consumers are being ripped off. Research by Citizens Advice, both through polls and public data analysis, found that across 5 essential markets (mobile, broadband, home insurance, mortgages and savings):

• British consumers lose £4.1 billion a year to the loyalty penalty (difference between the amount paid by existing and new customers).

• 8 in 10 people are paying a significantly higher price, in at least one of the markets, for remaining with their existing supplier.

• The loyalty penalty is, on average, £877 per year – equal to 3% of the average household’s total annual expenditure. “It beggars belief that companies in regulated markets can get away with routinely punishing their customers simply for being loyal. As a result of this super-complaint, the CMA should come up with concrete measures to end this systematic scam”, says Citizens Advice Chief Executive Gillian Guy.

The Government’s price cap in the energy market will bring down loyal customers’ bills by £75 per year on average. Citizens Advice analysis shows that excessive prices for loyal customers can be just as high, if not more so, in other markets. The charity also found the loyalty penalty is disproportionately paid by vulnerable consumers, such as older people and people with mental health issues. These groups are particularly likely to struggle with switching.

In one example, Citizens Advice helped an elderly couple whose daughter went to the charity after finding her parents were paying nearly £1000 a year too much on their home insurance. The couple, who are both in their 90s, had been with the same company for 6 years and over that time their premium had continually risen.

This is the fourth super-complaint Citizens Advice has made since being given the power in 2002. Their complaint on payment protection insurance (PPI) in 2005 helped to generate a huge win for consumers, with at least £32.2 billion returned to customers in refunds and compensation so far.

Citizens Advice have identified the scale of the problem in 5 essential markets – but it knows loyal customers are penalised elsewhere too. By submitting this complaint, the organisation is asking the CMA to investigate all markets where the loyalty penalty exists. Because the sectors are so diverse there is no one-size-fits-all solution. The CMA will need to work closely with other regulators and the Government to ensure the right action is taken in each market.

Gillian Guy, Chief Executive of Citizens Advice, said, “It’s completely unacceptable that consumers are still being ripped off for being loyal to companies they rely on every single day. Regulators and Government have recognised the loyalty penalty as a problem for a long time – yet the lack of any meaningful progress makes this super-complaint inevitable. The Government’s price cap in the energy market will protect some loyal customers. However, there’s still a long way to go in other sectors. The loyalty penalty is clearly unfair – 89% of people think it is wrong. The CMA needs to act now to stop people being exploited.”

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